For Parents

Digital Money, Online Payments & Safety

The Internet can be a scary place sometimes – here’s how to prep your kids to be smart with online payments.


Think of digital money as a key to an invisible vault where your child’s financial future lies. In today’s world, understanding online payments isn’t just important; it’s essential. You’ll need to teach your kids the basics of how these transactions work, why security is paramount, and how to manage their digital finances wisely. By doing so, you’ll equip them with the skills they need to navigate the financial landscape safely and responsibly. But where should you start, and what specific lessons should you focus on to guarantee their safety and understanding?

How to Help Your Kids Understand Digital Money

Start by explaining to your kids that digital money is just like the cash they see but exists electronically and can be used for online purchases. Make sure they understand that this type of money isn’t physical; they won’t hold it in their hands like coins or bills. Instead, it’s stored in digital accounts and used for buying things online or through apps.

You can show them examples of where digital money is used, like buying a game or an app on a tablet. Demonstrate how you log into an account, select the item, and use digital money to complete the transaction. This visual demonstration can help them grasp the concept more easily.

To make it relatable, compare it to a digital piggy bank where their allowance can be stored and spent digitally. Explain that just like they need to be careful with their physical money, they also need to be cautious with digital money. It’s important they know that digital money is real and can run out, just like cash, so they understand the value and the need to manage it wisely.

This sets the stage for more detailed lessons on online payments and safety.

Teaching Your Kids The Basics of Online Payments

Explaining the fundamentals of online payments to your kids involves breaking down the process into simple, easy-to-understand steps. Start by explaining what online payments are and how they work. Tell them that online payments are like using cash but in a digital form. You can use a computer or a smartphone to buy things, pay bills, or even send money to someone.

Next, show them how to set up an online payment account. This could be a basic account on a platform like PayPal or a banking app. Walk them through adding money to the account and making a small, supervised purchase. Make it a fun activity by letting them choose something small they’ve been wanting.

Teach them the importance of keeping their information safe. Explain why they should never share their passwords, PINs, or account details with anyone. Use examples they can relate to, like keeping their school locker combination private.

Types of Online Payments To Teach Your Kids

When teaching your kids about online payments, you’ll want to cover various types, such as credit and debit cards, e-wallets, and peer-to-peer payment apps, along with the specific safety precautions for each.

Start with credit and debit cards. Explain that these cards are linked to a bank account, and they should never share the card number, expiration date, or CVV with anyone online except trusted retailers.

Next, introduce e-wallets like PayPal or Apple Pay. These digital wallets store payment information securely, but it is still important to use strong, unique passwords and enable two-factor authentication. Remind your kids to avoid using public Wi-Fi when making transactions through e-wallets to prevent hacking.

Teaching Financial Responsibility Online

After understanding the different types of online payments, it’s important to teach your kids about financial responsibility when using these tools. Start by setting a clear budget. Explain to your children how much they can spend and encourage them to track their expenses. You can use apps designed for kids that help them see where their money goes and manage it better.

Next, discuss the concept of needs versus wants. Help your kids differentiate between essential purchases and impulse buys. An easy way to do this is by setting up a ‘waiting period’ for non-essential items. If they still want the item after a few days, it might be worth considering.

Additionally, involve your kids in online purchases. Show them how to compare prices, look for discounts, and read reviews. This teaches them to make well-informed choices rather than impulse buys.

Ensuring Your Kids’ Online Safety With Digital Payments

To safeguard your kids’ online safety with digital payments, start by teaching them the importance of keeping personal information private. Explain how details like their full name, address, and birthday should never be shared online unless you’ve given them explicit permission. Reinforce that this information can be misused if it falls into the wrong hands.

Next, teach them to recognize secure websites and payment portals. Show them how to look for ‘https’ in the URL and the padlock symbol, which indicates a secure connection. Make it clear that they should only enter payment information on trusted sites.

Another essential step is to educate them about strong passwords. Encourage them to use a mix of letters, numbers, and symbols, and never to reuse passwords across different sites. Emphasize the importance of not sharing passwords with friends.

Lastly, set clear rules about online purchases. Explain that they should always ask for your approval before making any digital payment. This ensures you can supervise their transactions and spot any potential issues.

Tools for Learning and Practice

Interactive tools and apps can make teaching your kids about online payments both fun and educational. These resources can transform complex topics into engaging activities, helping your children understand and practice safe digital transactions.

Here are some effective tools to explore:

  • PiggyBot: A virtual allowance app that teaches kids about saving, sharing, and spending money.
  • Bankaroo: A kid-friendly app that simulates banking, allowing children to manage virtual accounts and set financial goals.
  • FamZoo: A thorough family finance app that offers prepaid cards and online tracking to teach budgeting and responsible spending.
  • Allowance & Chores Bot: This app helps kids earn money through chores, promoting the concept of working for financial rewards.
  • Greenlight: A debit card for kids with parental controls, enabling real-world practice of spending and saving while parents monitor transactions.

Stay Safe!

By teaching your kids about digital money and online payments, you’re not just preparing them for the future—you’re turning them into financial wizards!

Emphasizing safety, responsibility, and smart practices guarantees they’ll navigate the digital world confidently and securely.

Start these lessons today, and you’ll see them making wise choices in no time.

Remember, your guidance now can make a world of difference in their financial journey.

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About the Author

David McCurrach

David McCurrach is the founder of Kids' Money. Following a career working in finance for several banks and credit unions, David started Kids' Money in 1995 and has since published three books on kids' financial literacy and allowance programs.

Last updated on: July 8, 2024